US | Fed set to hold rates steady in Powell’s final meeting as Chair

The Fed approaches this meeting in a somewhat more benign geopolitical environment than it did in March, but still-sticky core PCE inflation, alongside March’s upside surprises in retail sales and nonfarm payrolls, may push the Committee toward a somewhat more hawkish tone at the margin.

Key points

• Key points:
• While the third estimate of 4Q25 GDP confirmed a weaker end to last year than initially thought, US consumers continued to hold up well heading into 2026.
• Labor market signals remain mixed and volatile, pointing to broadly stable yet still fragile conditions, keeping downside risks to the employment goal in focus.
• As widely expected, headline inflation picked up in March driven by the sharp 21.2% m/m rise in gasoline prices derived from the Middle East energy shock.
• Financial markets have partly unwound earlier concerns about possible rate hikes as geopolitical tensions have eased from their March peak.
• The FOMC is set to keep the policy rate unchanged at 3.50%-3.75% this week and still convey a cautious, data-dependent approach in light of lingering risks.

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